Disclosure Policies of Investment Funds

Quarterly Journal of Finance, Forthcoming

57 Pages Posted: 9 Aug 2007 Last revised: 7 Oct 2014

See all articles by Thomas J. George

Thomas J. George

University of Houston - Department of Finance

Chuan-Yang Hwang

Nanyang Technological University (NTU)

Date Written: October 6, 2014


We examine voluntary and mandated disclosure of portfolio holdings by investment funds in a model where funds are characterized as having a stream of investment ideas and as providing liquidity to investors through redemption. We show that the greater is the fund's liquidity provision role, the more aggressively the fund trades on its ideas, the stronger is its preference to disclose information about its holdings voluntarily, and the weaker is its performance. We also show that mandatory disclosure can decrease information available in securities markets by crowding out the acquisition of private information that, through funds' trading, would be reflected in prices. Our model provides an explanation for why hedge funds and mutual funds differ in their resistance to public disclosure, and is consistent with stylized facts regarding how funds' investment decisions respond to poor performance and how differences in disclosure policies affect the future performance of well versus poorly performing funds.

Keywords: disclosure, mutual funds, hedge funds, dynamic, information

JEL Classification: G23, G28, M41, M44

Suggested Citation

George, Thomas J. and Hwang, Chuan-Yang, Disclosure Policies of Investment Funds (October 6, 2014). Quarterly Journal of Finance, Forthcoming. Available at SSRN: https://ssrn.com/abstract=1005257 or http://dx.doi.org/10.2139/ssrn.1005257

Thomas J. George (Contact Author)

University of Houston - Department of Finance ( email )

Houston, TX 77204
United States

Chuan-Yang Hwang

Nanyang Technological University (NTU) ( email )

Singapore, 639798
65-67905003 (Phone)
65-6791-3697 (Fax)

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